What do Google, Facebook, GE, Coca Cola, AstraZeneca, DuPont, United Acquisition, and W.L. Gore and Associates have in common? Some may be surprised about this but these major corporations actually have been formed in Delaware!
Although Delaware is known for being the second smallest state in the country, it serves as the home for numerous U.S. and international businesses. A quick peek on the official state website even reveals that “more than 66%” of the Fortune 500 companies have picked Delaware “as their legal home.”
So what’s the reason the state has attracted these huge businesses? There are a lot of contributing factors. Read on and let’s learn more regarding why a lot of top companies just love Delaware.
All About Delaware, The First State
As history tells us, Delaware gained its popular nickname because it was officially the first of the 13 states to ratify the United States Constitution on the 7th day of December 1787.
With a total area of only 2,489 square miles, Delaware is one of the smallest states in the United States. It’s also one of the country’s least populated states, ranking in the 46th position with an estimated 2021 population of just 994,735.
The Home to Fortune 500 Companies – And More!
Despite its tiny size, the so-called ‘Small Wonder’ is a favorite location for business formation. As mentioned earlier, Delaware is home to two thirds of the companies on the prestigious Fortune 500 list.
Additionally, a significant number of businesses from the United States and other countries are incorporated in the state, choosing it as their registered location. Some businesses also pick it as the place to go public by establishing their headquarters there.
Benefits of being formed in Delaware
There are, of course, compelling reasons why companies continue flocking to Delaware. While legislators may disagree on certain issues, they are united in helping make the state a hotspot for business formation. Laws have been put in place to encourage startup entrepreneurs and international companies to open their doors here. Plus, existing laws get tweaked as needed to accommodate changing requirements and circumstances.
Allow us to enumerate some of the advantages of forming a business in Delaware:
1. Delaware is corporate-friendly.
Passed in 1899, the Delaware General Corporation Law helped boost the state’s reputation as the perfect place for businesses to incorporate. This law was created in response to New Jersey’s initiative to attract business incorporation in their area. To date, the DGCL continues to be reviewed by corporate law experts each year to ensure that it constantly gets updated for the current times.
A business entity’s structure is also uncomplicated because one person can sign up for different positions in a corporation such as the president, director, shareholder, secretary, treasurer, among other roles. This means a startup can enjoy the advantages of being categorized as a corporation instead of as a sole proprietorship.
What’s more, an individual doesn’t even have to be a Delaware resident or an American national to start a company in the state. It is still possible to open a business entity as long as they have a registered agent with a Delaware address. The said agent may be a local resident or a business entity authorized to conduct business.
2. Processing administrative requirements is relatively easy.
Compared with other states, Delaware has simpler paperwork and faster procedures for individuals and groups starting their own businesses.
For example, Delaware One Stop offers new and existing businesses operating in the state to register, obtain licenses, and even report hiring through their online portal. This website caters to “small businesses, startups, entrepreneurs, expanding businesses and freelancers” – but not for those that are only incorporated but do not specifically conduct business transactions in the state.
In addition, the Delaware Department of State has the Export Delaware initiative, which provides assistance for new exporters and those hoping to explore exportation opportunities. Experts from this program aim to help businesses in exporting their products and services with greater ease. It is a known fact that small and mid-sized businesses that export “have faster-growing sales, create more jobs, and are less likely to go out of business” compared with establishments that do not.
3. Incorporated Delaware businesses are not required to pay corporate income tax.
Considered by many as a tax haven, companies that conduct business in Delaware just need to file a Corporate Income Tax Return with the Delaware Division of Revenue and pay a federal taxable income of 8.7%.
Meanwhile, incorporated companies that do not conduct any business in the state are not subjected to paying the same taxes as they only have to file taxes in their home state.
4. Privacy and anonymity
If desired, the names and addresses of LLC members and corporation shareholders can be kept anonymous. These personal details can be considered confidential in the state. This rule, however, does not include beneficial owners – or those who directly own and control companies.
5. A special court that specifically handles corporate cases.
Established way back 1792, the Delaware Court of Chancery is “a specialized court of equity with specific jurisdiction over corporate disputes,” explains the official website. The non-jury court guarantees the public that a capable, impartial judge will handle business-related matters in a “flexible, focused, and efficient” manner.
Appeals, on the other hand, are filed directly with the Delaware Supreme Court.
These are just some of the reasons why small and big companies, from both Delaware and beyond, consider the state ideal for business formation. If you think establishing your own startup in Delaware sounds like an appealing idea, your first step should be to consult a lawyer.
Whether you are planning to incorporate in the state or formally open a business there, it is recommended that you seek legal advice so you can understand all the associated legalities. That way, you can receive the best guidance as you make big decisions along the way.
Best of luck to your upcoming venture! We hope you find your target market – and achieve your business goals – in Delaware, the little state where big business dreams come true.